Court of Tax Appeals: Members Chairperson and JJ

..,.
REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals
QUEZON CITY
FIRST DIVISION
T SHUTTLE SERVICES, INC. , CTA CASE NO. 8650

Petitioner,
Members:
-versus - DEL ROSARIO, Chairperson,

UY, and
MINDARO-GRULLA, JJ.
COMMISSIONER OF
INTERNAL REVENUE,
REVENUE DISTRICT
OFFICER (ROO),
COLLECTION SUPERVISOR
AND COLLECTION OFFICERS
OF REVENUE DISTRICT
OFFICE 57 (RD0-57) BINAN Promulgated :
AND SAN PEDRO, LAGUNA,
Respondents .
){- - - -------- ------- - - - - ----- - - - --

DECISION
DEL ROSARIO, P.J.:
This is a Petition for Review filed by petitioner T -Shuttle

Services, Inc. seeking to set aside Warrant of Distraint and/or Levy
No. 057-03-13-074-12 which in effect denied petitioner's protest on
the Final Assessment Notice dated July 20, 2010 with attached
Assessment Notice Nos. F-057-LNTF-07-VT-002 and F-057-LNTF-
07 -IT -002 , for alleged deficiency Value-Added Tax ("VAT") of
P3 ,720,488.73 and income tax of P5 ,305,486.50, or a total of
P9 ,025 ,975.23, for calendar year 2007.
~
DECISION
T Shuttle Services, Inc. vs. CIR, et. a/.
CTA CASE NO. 8650
Page 2 of 23
THE PARTIES
Petitioner, T Shuttle Services, Inc. ("T Shuttle" or "petitioner"), is

a corporation duly formed and existing under the laws of the Republic
of the Philippines with principal address at Southplains I, Brgy. Sto
Tomas, Bifian, Laguna. 1
On the other hand, respondents Commissioner of Internal

Revenue ("CIR"), Revenue District Officer, Collection Supervisor and
Collection Officers of Revenue District Office ("ROO") - 57 are the
officers who effectively denied the protest and issued the challenged
warrant. Respondent Cl R may be served with summons and
processes at the BIR National Office Building, BIR Road, Diliman,
Quezon City. While respondents Revenue District Officer, Collection
Supervisor and Collection Officers of ROO - 57 may be served with
summons and other processes at Bureau of Internal Revenue ("BIR")
District Office No. 57, Bifian, Laguna. 2
On July 15, 2009, respondent CIR issued a Letter Notice ("LN")

No. 057 -RLF-07 -00-0004 7 informing petitioner of the discrepancy
resulting from the Reconciliation of Listing for Enforcement
("RELIEF") and Third Party Matching under the Tax Reconciliation
System ("TRS"), as compared to the tax returns filed by petitioner for
calendar year 2007. 3 The LN was received and signed by a certain
Malou Bohol on July 24, 2009.
The BIR, thru its LN Task Force Head, Salina B. Marinduque,

then issued a Follow-Up Letter dated August 24, 2009, which was
received and signed by a certain Amado Ramos. 4
On January 12, 2010, without any reply from petitioner, Letter

of Authority ("LOA") No. 2008 00044533 for the examination of
petitioner's book of accounts and other accounting records for VAT,
income tax and withholding tax for calendar year 2007, 5 and a Notice
for Informal Conference were issued. 6 Both the LOA and Notice for
Informal Conference were received and signed by a certain B.
Benitez on January 12, 2010.
1
CTA Docket, p. 8.
2
Admitted Facts, Joint Stipulation of Facts and Issues, pp. 301-302.
3
BIR Records, p. 5.
4
BIR Records, p. 6.
5
BIR Records, p. 16.
6
BIR Records, p. 13.
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DECISION
CTA CASE NO. 8650
Page 3 of 23
On March 29, 2010, respondent CIR, thru Deputy

Commissioner Nelson M. Aspe, then issued a Preliminary
Assessment Notice ("PAN"), with attached Annex described as
"Details of Discrepancies". 7
On July 20, 2010, respondent CIR, thru Deputy Commissioner

Nelson M. Aspe, issued a Final Assessment Notice with attached
Assessment Notice Nos. F-057-LNTF-07-VT-002 and F-057-LNTF-
07-IT-002 ("FAN"), for deficiency VAT, and deficiency income tax8 :
I. DEFICIENCY VALUE ADDED TAX

Discrepancy pet Letter Notice (Sales) p 15,478,710.74
Multiply by VAT Rate 12%
Deficiency VAT p 1,857,445.20
Add: 50% Surcharge 928,722.60
20% interest p.a. up to (7/31/2010) 934,320.93
TOTAL AMOUNT DUE p 3, 720,488.73
II. DEFICIENCY INCOME TAX

Net Taxable Income per AnnuaiiTR filed p -
Add: Additional Gross Income (Figure 1) 7,739,355.00
Total Taxable Income p 7,739,355.00
Multiply by Normal Income Tax Rate 35%
Adjusted Income Tax Due 2,708,774.25
Less: Income tax due per ITR filed -
Deficiency Income Tax 2,708,774.25
Add: 50% Surcharge 1,354,387.12
20% interest p.a. up to (7/31/2010) 1,242,325.13
TOTAL AMOUNT DUE p 5,305,486.50
On November 28, 2012, respondent ROO then issued a

Preliminary Collection Letter, requesting petitioner to pay the
aforementioned tax liability within ten (10) days from receipt thereof. 9
On January 23, 2013, res~ondent ROO issued a Final Notice

Before Seizure ("Final Notice") 1 stating that respondent has yet to
receive a reply from petitioner and in connection therewith, gave
petitioner the last opportunity to settle its tax liability within ten (1 0)
days from receipt thereof. The Final Notice also stated that should
respondent fail to hear from petitioner within the period granted,
respondent would be constrained to enforce collection through
7
BIR Records, pp. 24-29.
8
9
Exhibit "R-2", BIR Records, p. 38.
10
\!A
DECISION
CTA CASE NO. 8650
Page 4 of 23
summary remedies provided in the Tax Code, and/or to refer the case
to the Legal Division for the filing of the appropriate judicial action.
On March 20, 2013, petitioner, through its counsel, sent a letter

to respondents ROO and Collection Officers claiming that they were
not aware of any pending liabilities for the year 2007, and that Mr. B.
Benitez, who signed and received the preliminary notices, was a
disgruntled rank and file employee who was not authorized to receive
the notices and who did not forward the same to petitioner. 11 In the
said letter, petitioner also requested for a grace period of one ( 1)
month to review its documents.
In a letter dated April 2, 2013, respondent RDO denied

petitioner's request for grace period for lack of basis. 12
On April 18, 2013, petitioner sent respondent CIR its protest

against the Final Notice, claiming that it is not liable for any deficiency
income taxes for the year 2007; that it is exempt from payment of
VAT since it is a common carrier; that service of the Notice for
Informal Conference was invalid; and that it did not receive the PAN
and FAN prior to the issuance of the Final Notice. 13
On April 22, 2013, petitioner wrote another letter to respondent

ROO requesting them to take due note of the protest filed and
received on April 19, 2013, with the office of the Deputy
Commissioner for Operations, Mr. Nelson M. Aspe, refuting the
assessed tax liabilities. 14 The said letter was received by the BIR on
April 23, 2013.
On April 23, 2013, Warrant of Distraint and/or Levy No. 057-03-

13-074-R ("WDL") was constructively served to petitioner for refusal
to acknowledge the service of the warrant. 15
Hence, on May 2, 2013, petitioner filed the instant Petition for

Review (With Prayer for Preliminary Injunction and Issuance of a
Temporary Restraining Order). 16
11
Exhibit "R-4", BIR Records, pp. 41-42.
12
13
14
15
16
Petition for Review dated April25, 2013, CTA Docket, pp. 6-83.
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DECISION
CTA CASE NO. 8650
Page 5 of 23
In the May 17, 2013 hearing, the Court informed the parties that
petitioner's Motion for Preliminary Injunction with Issuance of a
Temporary Restraining Order shall be treated as a Motion for
Suspension of Collection of Tax, pursuant to Rule 10 of the Revised
Rules of the Court of Tax Appeals. 17 In the same hearing, petitioner
presented as its witnesses in support of its motion, Ms. Nely G.
Legaspi and Ms. Ma. Lourdes B. Omas-as, and thereafter made an
oral formal offer of evidence of its exhibits. 18
On May 27, 2013, respondent CIR filed her Comment (Re:

Petitioner's Motion for Suspension of Collection of Tax), 19 to which
petitioner filed its Reply ~To Respondent's Comment dated May 27,
2013) on June 10, 2013?
In a Resolution dated July 8, 2013, the Court granted the

Motion for Suspension of Collection of Taxes, subject to petitioner's
depositing of a cash bond in the amount of Nine Million Twenty Five
Thousand Nine Hundred and Seventy Five Pesos and Twenty Three
Centavos (P9,025,975.23), or posting of a GSIS bond or a bond from
other reputable surety company duly accredited by the Supreme
Court, in the amount equivalent to double the amount being collected
or Eighteen Million Fifty One Thousand Nine Hundred and Fifty
Pesos and Forty Six Centavos (P18,051 ,950.46), within ten (1 0) days
from receipt of the Resolution. 21
On September 13, 2013, the Court granted the Motion to Admit

Answer filed by respondents on September 2, 2013 22 and thereby
admitted respondent's Answer dated August 22, 2013. 23
In respondent CIR's Answer, 24 she raised the following special

and affirmative defenses:
1. No error or illegality can be ascribed to respondent's

assessment of petitioner's deficiency tax liability since due
process was observed;
2. Petitioner failed to interpose a timely protest against the

FAN and to submit the supporting documents necessary
17
CTA Docket, pp. 94-97.
18
Minutes of the Hearing dated May 17, 2013, CTA Docket, pp. 90-92.
19
°
2
21
22
CTA Docket, 193-216.
23
Answer, CTA Docket, pp. 200-216; Resolution dated September 13, 2013, CTA Docket, p. 227.
24
C1)
DECISION
CTA CASE NO. 8650
Page 6 of 23
to refute the findings of the revenue examiners, within the

mandated sixty (60) day period;
3. Petitioner is liable for deficiency income tax and deficiency

VAT; and,
4. There exists a presumption in favor of the propriety and

exactness of tax assessments.
On September 4, 2013, petitioner filed a Manifestation and

Motion, 25 stating that it will no longer file the bond for the suspension
of the collection of tax; instead, believing that it would best serve the
interest of both parties to the case, if its funds will be used to settle its
tax liability through amicable settlement rather than pay exorbitant
premiums for the surety bond, petitioner prayed that the Court issue a
status quo order to give the parties time to reach an amicable
settlement. Despite notice, respondents failed to file their comment to
the Manifestation and Motion. 26
In a Resolution dated December 16, 2013, the Court noted

petitioner's Manifestation and denied its Motion for lack of merit? 7
On December 18, 2013, petitioner filed another Manifestation

with Motion reiterating its prayer for the issuance of a "status quo
order" suspending the proceedings of the case, and requesting that
the BIR docket be forwarded to ROO No. 57. 28
On February 3, 2014, petitioner filed its Pre-Trial Brief, 29 while

respondents filed their Pre-Trial Brief on February 6, 2014. 30
During the Pre-Trial Conference on February 7, 2014, the Court

noted petitioner's withdrawal of its Manifestation with Motion filed on
December 18, 2013, since the certified true copy of the BIR docket
had already been transmitted to ROO No. 57. 31
On February 25, 2014, the parties submitted their Joint

Stipulation of Facts and Issues, 32 and upon approval thereof on
25
26
Records Verification dated October 18, 2013, CTA Docket, p. 228.
27
28
29
3
°
31
32
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DECISION
T Shuttle Services, Inc. vs. CIR, et. at.
CTA CASE NO. 8650
Page 7 of 23
March 4, 2014, 33 the Court issued the Pre-Trial Order on March 13,
2014. 34
On March 31, 2014, petitioner filed a Motion to Amend Pre-Trial

Order. 35 Despite due notice, respondents failed to file their comment
thereon. 36 In a Resolution dated July 7, 2014, the Court granted the
Motion to Amend Pre-Trial Order. 37
During trial, both parties presented their respective evidence.

Petitioner adopted the testimony of its witnesses who testified during
the hearing of its motion for suspension of collection of taxes held on
May 17, 2013. 38
Petitioner's evidence was admitted in the Court's Resolution

dated June 20, 2014, 39 while respondents' evidence was admitted in
the Court's Resolution dated November 11, 2015. 40
With the filing of respondent CIR's Manifestation 41 on January

7, 2016 stating that she will adopt the arguments raised in her
Answer filed on September 2, 2013, as her Memorandum, and with
Petitioner's Memorandum filed on January 13, 2016, 42 the case was
submitted for decision on January 27, 2016. 43
THE ISSUE
In their Joint Stipulation of Facts and lssues, 44 the parties

submitted for resolution the sole issue of whether petitioner is liable
for deficiency income tax and VAT for CY 2007 in the total amount of
P9,025,975.23, including surcharge, deficiency and delinquency
interest.
33
34
35
36
CTA Docket, p. 409.
37
38
39
4
41
° CTA Docket, pp. 578-579.
42
43
CTA Docket, p. 619.
44
CTA Docket, p. 302.
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DECISION
T Shuttle Services, Inc. vs. C/R, et. a/.
CTA CASE NO. 8650
Page 8 of 23
PETITIONER'S ARGUMENTS
Petitioner argues that it was deprived of due process as it never

received the LOA No. 2008 0004453, Notice for Informal Conference,
PAN and FAN purportedly sent by respondents. 45
Based on the records, the LOA and Notice for Informal

Conference were signed as received by a certain Mr. B. Benitez.
Petitioner, however, claims that Mr. Benitez was not authorized to
receive such notices as he was a low level employee who had
already left the company in March 2010. 46
With regard to the PAN and FAN, respondents presented the

Registry Return Receipts to prove that such were sent to petitioner
through registered mail. Petitioner insists that the signature in the
Registry Return Receipts does not indicate whose signature it is and
that no evidence has been presented by respondent to authenticate
the same. 47 Thus, petitioner claims that said PAN and FAN cannot be
considered as valid as they were not properly served upon and
received by petitioner.
Assuming that the PAN and FAN were actually served,

petitioner argues that the PAN and FAN are invalid for failure to state
the factual and legal basis thereof. 48
Petitioner also contends that, as a common carrier already

subject to percentage tax, its services are exempt from VAT pursuant
to Section 109 U) of the National Internal Revenue Code ("NIRC") of
1997, as amended, and Revenue Regulations No. 16-2005. 49
Petitioner alleges that it is not liable for any supposed

deficiency income tax as its Annual Income Tax Return for taxable
year 2007 shows that the amount being assessed by respondents, as
supposed additional gross income, had been duly declared and the
taxes owing thereon had been fully paid. 5°
45
CTA Docket, pp. 12 and 596.
46
CTA Docket, p. 601.
47
CTA Docket, p. 602.
48
CTA Docket, p. 605.
49
CTA Docket, p. 608.
5
°CTA Docket, p. 609.
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DECISION
CTA CASE NO. 8650
Page 9 of 23
Finally, petitioner posits that the Preliminary Collection Letter,

Final Notice and WDL are null and void as they are based on a void
assessment. 51
RESPONDENTS' COUNTER-ARGUMENTS
On the other hand, respondents counter-argue that there was

no error or illegality that can be ascribed to its assessment of
petitioner's deficiency tax liability since procedural due process
requirements were complied with in the issuance of such
assessment; 52 that pursuant to Revenue Regulations ("RR") No. 12-
99, service through registered mail is a valid mode of serving the
PAN and FAN upon the taxpayer being assessed; 53 and that the
existence of the Registry Return Receipts is adequate to show the
fact of receipt of PAN and FAN by petitioner in the ordinary course of
mail.
Respondents further aver that petitioner failed to interpose a

timely protest against the FAN issued against it and to submit the
supporting documents necessary to refute the findings of the revenue
examiners, within the prescribed period of sixty (60) days. 54 Given
that petitioner only protested the assessment on April 19, 2013,
almost three (3) years after the receipt of the FAN on September 17,
2010 as per Registry Return Receipt, 55 respondent submits that
petitioner failed to comply with Section 228 of the NIRC, and
effectively prevented this Court from acquiring jurisdiction over this
Petition for Review. 56
THE RULING OF THE COURT
Warrant of Distraint and/or Levy

is invalid
Before any revenue officer can conduct an examination or

assessment, a Letter of Authority ("LOA") must be issued to give
authority to the appropriate revenue officer assigned to perform
assessment functions. The LOA empowers or enables said revenue
officer to examine the books of accounts and other accounting
51
CTA Docket, p. 610.
52
CTA Docket, p. 202.
53
CTA Docket, p. 203.
54
CTA Docket, p. 205.
55
56
CTA Docket, p. 206.
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DECISION
CTA CASE NO. 8650
Page 10 of 23
records of a taxpayer for the purpose of collecting the correct amount

of tax. 57 In the absence of such an authority, the assessment or
examination is a nullity. 58 Section 13 of the NIRC of 1997, as
amended, provides:
"SEC. 13. Authority of a Revenue Officer. - Subject to the

rules and regulations to be prescribed by the Secretary of Finance,
upon recommendation of the Commissioner, a Revenue Officer
assigned to perform assessment functions in any district may,
pursuant to a Letter of Authority issued by the Revenue
Regional Director, examine taxpayers within the jurisdiction of
the district in order to collect the correct amount of tax, or to
recommend the assessment of any deficiency tax due in the same
manner that the said acts could have been performed by the
Revenue Regional Director himself."(Emphases supplied)
On the other hand, Section 228 of the NIRC of 1997, as

amended, provides for the procedure and manner on which tax
deficiency assessments should be issued, viz.:
"SEC. 228. Protesting of Assessment. - When the

Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the
taxpayer of his findings: Provided, however, that a pre-
assessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on
the face of the return; or
(b) When a discrepancy has been determined between the

tax withheld and the amount actually remitted by the withholding
agent; or
(c) When a taxpayer who opted to claim a refund or tax

credit of excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not
been paid; or
(e) When the article locally purchased or imported by an

exempt person, such as, but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
57
Commissioner of Internal Revenue vs. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010.
58 ld.
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DECISION
CTA CASE NO. 8650
Page 11 of 23
The taxpayers shall be informed in writing of the law and

the facts on which the assessment is made; otherwise, the
assessment shall be void.
Within a period to be prescribed by implementing rules and

regulations, the taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the Commissioner or his
duly authorized representative shall issue an assessment based on
his findings.
Such assessment may be protested administratively by filing

a request for reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations. Within
sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is not acted

upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of one
hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable."
To implement the provisions of Section 228 of the NIRC of

1997, as amended, RR No. 12-99 was issued. It provides that after
audit of a taxpayer's books of accounts and other accounting records,
the BIR shall send the taxpayer a Notice for Informal Conference,
inviting the taxpayer to a meeting to discuss the examiner's
preliminary findings. The BIR shall proceed to send a Preliminary
Assessment Notice and eventually a Final Assessment Notice and
Formal Letter of Demand to the taxpayer to inform him that he is
liable for deficiency taxes and the facts and the law upon which the
assessment was made.
Section 3 of RR No. 12-99 provides:
"SECTION 3. Due Process Requirement in the Issuance

of a Deficiency Tax Assessment.-
3.1 Mode of procedures in the issuance of a deficiency tax

assessment:
3.1.1 Notice for informal conference.-The Revenue

Officer who audited the taxpayer's records shall, among others,
state in his report whether or not the taxpayer agrees with his
findings that the taxpayer is liable for deficiency tax or taxes. If the
taxpayer is not amenable, based on the said Officer's submitted
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DECISION
CTA CASE NO. 8650
Page 12 of 23
report of investigation, the taxpayer shall be informed, in writing, by

the Revenue District Office or by the Special Investigation Division,
as the case may be (in the case Revenue Regional Offices) or by
the Chief of Division concerned (in the case of the BIR National
Office) of the discrepancy or discrepancies in the taxpayer's
payment of his internal revenue taxes, for the purpose of "Informal
Conference," in order to afford the taxpayer with an opportunity to
present his side of the case. If the taxpayer fails to respond within
fifteen (15) days from date of receipt of the notice for informal
conference, he shall be considered in default, in which case, the
Revenue District Officer or the Chief of the Special Investigation
Division of the Revenue Regional Office, or the Chief of Division in
the National Office, as the case may be, shall endorse the case
with the least possible delay to the Assessment Division of the
Revenue Regional Office or to the Commissioner or his duly
authorized representative, as the case may be, for appropriate
review and issuance of a deficiency tax assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN).-If after

review and evaluation by the Assessment Division or by the
Commissioner or his duly authorized representative, as the case
may be, it is determined that there exists sufficient basis to assess
the taxpayer for any deficiency tax or taxes, the said Office shall
issue to the taxpayer, at least by registered mail, a Preliminary
Assessment Notice (PAN) for the proposed assessment, showing
in detail, the facts and the law, rules and regulations, or
jurisprudence on which the proposed assessment is based (see
illustration in ANNEX A hereof). If the taxpayer fails to respond
within fifteen (15) days from date of receipt of the PAN, he shall be
considered in default, in which case, a formal letter of demand and
assessment notice shall be caused to be issued by the said Office,
calling for payment of the taxpayer's deficiency tax liability,
inclusive of the applicable penalties.
XXX XXX XXX
3.1.4 Formal Letter of Demand and Assessment Notice. -

The formal letter of demand and assessment notice shall be issued
by the Commissioner or his duly authorized representative. The
letter of demand calling for payment of the taxpayer's deficiency tax
or taxes shall state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void (see
illustration in ANNEX 8 hereof).
The same shall be sent to the taxpayer only by

registered mail or by personal delivery.
If sent by personal delivery, the taxpayer or his duly

authorized representative shall acknowledge receipt thereof in the
duplicate copy of the letter of demand, showing the following: (a)
His name; (b) signature; (c) designation and authority to act for and
in behalf of the taxpayer, if acknowledged received by a person
other than the taxpayer himself; and (d) date of receipt thereof."
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DECISION
CTA CASE NO. 8650
Page 13 of 23
Sections 3.1.2 and 3.1.4 of RR No. 12-99 provide that service

of the PAN/FAN to the taxpayer may be made by registered mail. It is
settled in our jurisprudence that if the assessment notice is served by
registered mail, and the original was not returned to the BIR, the
presumption is that the taxpayer received said assessment notice in
the regular course of mail, pursuant to Section 3 (v), Rule 131 of the
Rules of Court, which provides as follows:
"Sec. 3. Disputable Presumptions. The following presumptions are

satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
XXX XXX XXX
(v) That a letter duly directed and mailed was received in the
regular course of the mail."
The facts to be proven in order to raise this presumption are:

(a) that the letter was properly addressed with postage prepaid; and
(b) that it was mailed. Once these facts are proved, the presumption
is that the letter was received by the addressee as soon as it could
have been transmitted to him in the ordinary course of the mail. 59
In Barcelon, Roxas Securities, Inc. (now known as UBP

Securities, Inc.) vs. Commissioner of Internal Revenue, 60 however,
the Supreme Court ruled that while a mailed letter is deemed
received by the addressee in the ordinary course of mail, this remains
merely a disputable presumption subject to controversion, and a
direct denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter was indeed
received by the addressee, thus:
"In Protector's Services, Inc. v. Court of Appeals, this Court

ruled that when a mail matter is sent by registered mail, there exists
a presumption, set forth under Section 3 (v), Rule 131 of the Rules
of Court, that it was received in the regular course of mail. The facts
to be proved in order to raise this presumption are: (a) that the
letter was properly addressed with postage prepaid; and (b) that it
was mailed. While a mailed letter is deemed received by the
addressee in the ordinary course of mail, this is still merely a
disputable presumption subject to controversion, and a direct
denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter was
indeed received by the addressee." (Emphasis supplied)
59
Gonzalo P. Nava vs. Commissioner of Internal Revenue, G.R. No. L-19470, January 30, 1965.
60
G.R. No. 157064, August 7, 2006, citing Protector's Services, Inc. vs. Court of Appeals, 386 Phil. 611, 623
(2000).
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DECISION
CTA CASE NO. 8650
Page 14 of 23
In the case at bar, petitioner denies receipt of the LOA, Notice

for Informal Conference, PAN and FAN, which if true would make the
assessment, including the WDL void.
In Commissioner of Internal Revenue vs. Metro Star Superama,

61
lnc., the Supreme Court enunciated that failure to strictly comply
with the notice requirements prescribed under Section 228 of the
NIRC of 1997, as amended, and RR No. 12-99 is tantamount to
denial of due process.
Moreover, in Commissioner of Internal Revenue vs. BASF

Coating + Inks Phil., lnc., 62 the Supreme Court held that the CTA is
correct in holding that the FAN never attained finality because
respondent never received it, either actually or constructively.
A careful perusal of the LOA and Notice for Informal

Conference sent to petitioner by respondent through personal
service, shows that said documents were signed and received by a
certain Mr. Benitez. According to petitioner, Mr. Benitez is an
operations staff member who is not authorized to receive such
documents on behalf of petitioner. Furthermore, petitioner claims that
Mr. Benitez, who resigned in March 2010, did not forward the said
notices and assessments to petitioner or to any of its authorized
agents. This was testified to by Ms. Nely G. Legaspi, petitioner's
General Manager on direct examination by way of Judicial Affidavit63
which she identified during the May 17, 2013 hearing, as follows:
"9. Q: I am showing to you a document entitled Letter of Authority

dated January 12, 2010, is this the same document you referred
to?
A: Yes that is the same document.
(Counsel's manifestation: For purposes of the record, counsel

marks the Letter of Authority, dated January 12, 2010, as Exhibit B)
10. Q: I am showing to you a document entitled Notice for Informal

Conference, dated January 12, 2010. Is this the same document
you referred to?
A: Yes, that is the same document.
61
G.R. No. 185371, December 8, 2010.
62
G.R. No. 198677, November 26, 2014.
63
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DECISION
CTA CASE NO. 8650
Page 15 of 23
(Counsel's manifestation: For purposes of the record, counsel

marks the Notice for Informal Conference, dated January 12, 2010,
as Exhibit C)
XXX XXX XXX
13. Q: You mentioned that the BIR officers told you that your
company received these documents before. Why did they say this?
A: They said that the notices were sent to our office and received
by a Mr. Benitez.
14. Q: Who is Mr. Benitez?
A: Mr. Benitez was a former employee of our company. He left

the company in March of 2010. If you take a look the Final
Notice Before Seizure and the Letter of Authority, there are
signatures there of Mr. Benitez showing that he received the
documents on January 12, 2010.
15. Q: If that is true, then why did you say that you never saw these
documents before?
A: Because that is the truth, I never saw these documents

before. First of all, Mr. Benitez was not authorized by the
company to receive notices. He was definitely not authorized
to receive notices from the BIR or from anyone at all. He was
just an operations staff member. He was a low ranking
employee. The ones authorized in our company to receive
these notices are the designated members of our accounting
staff. Or it could have been given to me, since I am the General
Manager, or to the Finance Head, but not to a member of the
operations staff who is not authorized. I don't know if Mr.
Benitez really received the documents, but if he did, besides
being unauthorized, he also never gave these documents to
the company." 64 (Emphasis supplied)
There being no evidence to the contrary, and giving credence

to Ms. Legaspi's testimony, the Court finds that the LOA and Notice
for Informal Conference were not received by the taxpayer's
authorized representative, and therefore cannot be said to have been
duly received by the taxpayer itself.
With regard to the PAN and FAN, petitioner also denies receipt
of the same, albeit respondent claims they have been sent through
registered mail.
64
a*\
DECISION
CTA CASE NO. 8650
Page 16 of 23
Respondent insists that it sent the PAN dated March 29, 2010
by registered mail on April 6, 2010 and that it was received by
petitioner on June 23, 2010 as evidenced by the Registry Return
Receipt No. 5187. Respondent also claims that the FAN dated July
20, 2010 was sent by registered mail on September 9, 2010 and was
received by petitioner on September 17, 2010, as evidenced by
Registry Return Receipt No. 2581. 65
Respondent presented Revenue Officer, Mr. Joseph V. Galicia,

who duly identified the Registry Return Receipts, and on direct
examination by way of Judicial Affidavit, 66 testified that he personally
instructed the preparation and sending of the PAN and FAN through
registered mail, to wit:
"012: After the Letter of Authority and Notice for Informal

Conference were served to the taxpayer, what happened next?
A 12: The taxpayer did not reply to the notice, hence a preliminary
assessment notice dated 29 March 2010 was sent through
registered mail at the taxpayer's registered address.
013: Do you have proof that you mailed this preliminary assessment
notice?
A 13: Yes, it was mailed on 4 June 2010 through registered mail and
was received by the addressee on 23 June 2010 as manifested on
the registry return receipt.
014: I am showing you a document denominated as a Registry

Return Receipt indicating T-Shuttle Service, Inc. as the addressee to
be marked as Exhibit "R-11" for the respondent. What is the relation
of this document to the service that you are referring to?
A 14: That is the Registry Return Receipt evincing service of the

Preliminary Assessment Notice issued to petitioner and released for
service upon my order.
015: You mentioned that a PAN was sent to petitioner, I am

showing you a document denominated as Preliminary Assessment
Notice dated 29 March 2010, to be marked as Exhibit "R-12", for the
respondent. What is the relation of this document to the PAN which
you mentioned earlier?
A 15: This is the Preliminary Assessment Notice dated 29 March

2010 that I mentioned earlier.
65
CTA Docket, p. 202.
66
Exhibit "R-15", CTA Docket, p. 491.
r:f\
DECISION
CTA CASE NO. 8650
Page 17 of 23
016: After the PAN was issued, what happened next?
A 16: Despite notice the taxpayer did not file its protest to the PAN.
017: What did you do next if any?
A 17: I recommended the issuance of the Final Assessment Notice.
018: What happened next after the FAN was issued?
A 18: After approval of the FAN by the Commissioner of Internal

Revenue the same was sent by registered mail.
019: Do you have proof that the FAN was sent and received by the
petitioner?
A 19: Yes, I instructed the mailing of the FAN through registered mail
on 9 September 201 0 and the same was received by the addressee
on 17 September 201 0 as manifested on the registry return receipt.
020: I am showing you a document denominated as a Registry

Return Receipt indicating T-Shuttle Service, Inc. as the addressee to
be marked as Exhibit "R-13" for the respondent. What is the relation
of this document to the service that you are referring to?
A20: That is the Registry Return Receipt evincing service of the

Final Assessment Notice issued to petitioner and released for
service upon my order.
021: You mentioned that a FAN was sent to petitioner, I am

showing you a document denominated as Final Assessment Notice
dated 20 July 2010, to be marked as Exhibit "R-14", for the
respondent. What is the relation of this document to the FAN which
you have mentioned earlier?
A21: This is the FAN that I mentioned earlier."67
During cross-examination, however, although Mr. Galicia

confirmed that the PAN and FAN were sent to petitioner by registered
mail, he admitted that he was uncertain as to whether the PAN
and FAN were actually received by petitioner, 68 to wit:
67
68
TSN dated April 7, 2015, pp. 14-16.
~
DECISION
T Shuttle Services, Inc. vs. C/R, et. at.
CTA CASE NO. 8650
Page 18 of 23
Atty. Castillo:
Q: Mr. Witness, you testified in your Judicial Affidavit that the

Preliminary Assessment Notice was mailed through Registered
Mail and received by the addressee on June 23, 2010. Is this
correct?
Mr. Galicia:
A: Yes, Attorney.
Atty. Castillo:
Okay.
Q: Do you know who actually received the Preliminary

Assessment Notice?
Mr. Galicia:
A: Actually no, Attorney, because it was the, (interrupted).
Justice Uy:
Can you flash the document in the projector?
Justice Del Rosario:
The registry receipt, please.
Atty. Castillo:
Q: Mr. Witness, I asked if you know the person who received

the Preliminary Assessment Notice which was sent by mail?
Mr. Galicia:
A: I don't know personally.
XXX XXX XXX
Atty. Castillo.
Ah, that's enough, thank you.
Q: You also testified that the Final Assessment Notice was

likewise sent by Registered Mail on September 9, 2010, and it
was also received by the addressee. Is this correct?
Mr. Galicia:
A: Yes, Attorney.
Atty. Castillo:
rf\
DECISION
CTA CASE NO. 8650
Page 19 of 23
Q: Do you know the person who received this Final Assessment

Notice?
Mr. Galicia:
A: The same, Sir, I don't."
In Barcelon, the Supreme Court emphasized the requirement

that the taxpayer should actually receive, even beyond the
prescriptive period, the assessment notice, which was timely
released, mailed and sent. 69
Thus, it is not simply a question of whether the PAN and FAN

were sent to petitioner, but it is imperative that the taxpayer actually
received said tax assessment notices. In this case, Mr. Galicia
admitted to having no personal knowledge of whether petitioner
actually received the PAN and FAN. Rather, Mr. Galicia referred to
the Registry Return Receipts as proof that the PAN and FAN reached
petitioner.
Perusal of the records and of Registry Return Receipt No. 5187

and Registry Return Receipt No. 2581, however, shows that the
signatures therein are unidentified and unauthenticated. It was not
established whether such signatures indeed belong to petitioner's
authorized representative. Stated otherwise, the identity and authority
of the person whose signature appears on the registry return receipts
were not established.
The Court has been consistent in its ruling that registry return
cards must be authenticated to serve as proof of receipt of letters
sent through registered mail. 70 To be sure, the presentation of the
registry card with an unauthenticated signature is not equivalent to
proof that a letter sent through registered mail was actually received
by the addressee.
In Ting vs. Court of Appea/s, 71 the Supreme Court held:
"Given petitioners' denial of receipt of the demand letter, it

behooved the prosecution to present proof that the demand letter
was indeed sent through registered mail and that the same was
received by petitioners. This, the prosecution miserably failed to do.
Instead, it merely presented the demand letter and registry return
69
Supra, note 61.
70
Suarez vs. People, G.R. No. 172573, June 19, 2008.
71
G.R. No. 140665, November 13,2000.
\1\
DECISION
CTA CASE NO. 8650
Page 20 of 23
receipt as if mere presentation of the same was equivalent to proof

that some sort of mail matter was received by petitioners. Receipts
for registered letters and return receipts do not prove
themselves; they must be properly authenticated in order to
serve as proof of receipt of the letters.
Likewise, for notice by mail, it must appear that the same

was served on the addressee or a duly authorized agent of the
addressee. In fact, the registry return receipt itself provides that "[a]
registered article must not be delivered to anyone but the
addressee, or upon the addressee's written order, in which case
the authorized agent must write the addressee's name on the
proper space and then affix legibly his own signature below it.
In the case at bar, no effort was made to show that the

demand letter was received by petitioners or their agent. All that
we have on record is an illegible signature on the registry
receipt as evidence that someone received the letter. As to
whether this signature is that of one of the petitioners or of
their authorized agent remains a mystery. From the registry
receipt alone, it is possible that petitioners or their authorized
agent did receive the demand letter." (Emphases supplied)
Moreover, pursuant to Section 13, Rule 13 of the 1997 Rules

on Civil Procedure, it is the registry receipt issued by the mailing
office and the affidavit of the person who mailed the letter that proves
service made through registered mail. This was reiterated in Republic
of the Philippines vs. Resins, lncorporated, 72 viz.:
"When service of notice is an issue, the rule is that the

person alleging that the notice was served must prove the fact of
service. The burden of proving notice rests upon the party asserting
its existence. In civil cases, service made through registered mail is
proved by the registry receipt issued by the mailing office and an
affidavit of the person mailing of facts showing compliance with
Section 13, Rule 13 of the 1997 Rules on Civil Procedure.
XXX XXX XXX
OSG's denial of receipt of the 17 March 1993 Judgment

required Resins, Inc. to show proof that the Judgment was sent
through registered mail and that it was received by the Republic.
While the certification from the RTC Clerk of Court and photocopies
of the return slips prove that the Republic was served the judgment,
it does not follow that the Republic, via the OSG, actually received
the judgment. Receipts for registered letters and return receipts
do not prove themselves, they must be properly authenticated
in order to serve as proof of receipt of the letters. Resins, Inc.
also did not show a certification from the postmaster that
notice was duly issued and delivered to the OSG such that
72
G.R. No. 175891, January 12, 2011.
~
DECISION
CTA CASE NO. 8650
Page 21 of 23
service by registered mail may be deemed completed. It

cannot be stressed enough that "it is the registry receipt
issued by the mailing office and the affidavit of the person
mailing, which proves service made through registered mail."
Absent one or the other, or worse both, there is no proof of
service.
XXX XXX XXX
While we concede that there may be a presumption of regularity, in

the ordinary course of events, that the RTC Clerk of Court sent the
17 March 1993 Judgment to the OSG, such presumption should fail
when the OSG itself denies receipt. When the service of the
judgment is questioned, such as in the present case, there is a
need to present both the registry receipt issued by the mailing
office and the affidavit of the person mailing. Since the OSG
presented proof of non-receipt, it became incumbent upon Resins,
Inc. to prove receipt, which Resins, Inc. failed to do." (Emphases
supplied)
Although the Court frowns upon petitioner's bare blanket denial

of receipt of any of the notices, it was, however, incumbent upon
respondents to provide sufficient evidence to prove that the PAN and
FAN were actually received by petitioner. This respondent failed to
do.
Again, in Estate of the Late Juliana Diez Vda. de Gabriel vs.

Commissioner of Internal Revenue, 73 the Supreme Court reiterated
its pronouncement that due process requires that the assessment
must be served on and received by the taxpayer, viz:
"(D)ue process requires at the very least that such notice

actually be received. In Commissioner of Internal Revenue v.
Pascor Realty and Development Corporation, we had occasion to
say:
An assessment contains not only a computation of tax

liabilities, but also a demand for payment within a
prescribed period. It also signals the time when
penalties and interests begin to accrue against the
taxpayer. To enable the taxpayer to determine his
remedies thereon, due process requires that it
must be served on and received by the taxpayer."
(Emphasis supplied)
Here, in view of respondent's failure to prove that the PAN and

FAN were properly and duly served upon and received by petitioner,
73
G.R. No. 155541, January 27, 2004.
~
DECISION
CTA CASE NO. 8650
Page 22 of 23
the assessments made against petitioner for deficiency income tax

and VAT for calendar year 2007 are void for failure to accord
petitioner due process in the issuance thereof. Accordingly, there
being no final and valid assessment to begin with, petitioner cannot
be considered a delinquent taxpayer. As such, the WDL issued by
respondent to petitioner, in so far as it seeks to collect from petitioner
the aforesaid delinquent income tax and VAT for calendar year 2007
is void.
Considering that the subject deficiency income tax and VAT

assessments and the corresponding WDL issued against petitioner
are void, the Court is left with no recourse but to cancel and set them
aside.
WHEREFORE, premises considered, the instant Petition for

Review is hereby GRANTED. Accordingly, Final Assessment Notice
dated July 20, 2010, and its attached Assessment Notice No. F-057-
LNTF-07-IT-002 dated July 20, 2010 assessing petitioner for
deficiency income tax of P5,305,486.50 and Assessment Notice No.
F-057-LNTF-07-VT-002 dated July 20, 2010 assessing petitioner for
deficiency VAT of P3,720,488.73, or a total of P9,025,975.23, for
calendar year 2007 and the Warrant of Distraint and/or Levy No. 057-
03-13-074-12 are hereby CANCELLED and SET ASIDE.
SO ORDERED.
Presiding Justice
WE CONCUR:
•
ER~P.UY
Associate Justice
~N.M~~.C~
CIELITO N. MINDARO-GRULLA
Associate Justice
DECISION
CTA CASE NO. 8650
Page 23 of 23
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.
~w
ROMAN G. DEL ROSARIO
Presiding Justice

Court of Tax Appeals: Members Chairperson and JJ

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REPUBLIC OF THE PHILIPPINES

T SHUTTLE SERVICES, INC. , CTA CASE NO. 8650

-versus - DEL ROSARIO, Chairperson,

){- - - -------- ------- - - - - ----- - - - --

DEL ROSARIO, P.J.:

This is a Petition for Review filed by petitioner T -Shuttle

Petitioner, T Shuttle Services, Inc. ("T Shuttle" or "petitioner"), is

On the other hand, respondents Commissioner of Internal

On July 15, 2009, respondent CIR issued a Letter Notice ("LN")

The BIR, thru its LN Task Force Head, Salina B. Marinduque,

On January 12, 2010, without any reply from petitioner, Letter

On March 29, 2010, respondent CIR, thru Deputy

On July 20, 2010, respondent CIR, thru Deputy Commissioner

I. DEFICIENCY VALUE ADDED TAX

II. DEFICIENCY INCOME TAX

On November 28, 2012, respondent ROO then issued a

On January 23, 2013, res~ondent ROO issued a Final Notice

On March 20, 2013, petitioner, through its counsel, sent a letter

In a letter dated April 2, 2013, respondent RDO denied

On April 18, 2013, petitioner sent respondent CIR its protest

On April 22, 2013, petitioner wrote another letter to respondent

On April 23, 2013, Warrant of Distraint and/or Levy No. 057-03-

Hence, on May 2, 2013, petitioner filed the instant Petition for

On May 27, 2013, respondent CIR filed her Comment (Re:

In a Resolution dated July 8, 2013, the Court granted the

On September 13, 2013, the Court granted the Motion to Admit

In respondent CIR's Answer, 24 she raised the following special

1. No error or illegality can be ascribed to respondent's

2. Petitioner failed to interpose a timely protest against the

to refute the findings of the revenue examiners, within the

3. Petitioner is liable for deficiency income tax and deficiency

4. There exists a presumption in favor of the propriety and

On September 4, 2013, petitioner filed a Manifestation and

In a Resolution dated December 16, 2013, the Court noted

On December 18, 2013, petitioner filed another Manifestation

On February 3, 2014, petitioner filed its Pre-Trial Brief, 29 while

During the Pre-Trial Conference on February 7, 2014, the Court

On February 25, 2014, the parties submitted their Joint

On March 31, 2014, petitioner filed a Motion to Amend Pre-Trial

During trial, both parties presented their respective evidence.

Petitioner's evidence was admitted in the Court's Resolution

With the filing of respondent CIR's Manifestation 41 on January

In their Joint Stipulation of Facts and lssues, 44 the parties

Petitioner argues that it was deprived of due process as it never

Based on the records, the LOA and Notice for Informal

With regard to the PAN and FAN, respondents presented the

Assuming that the PAN and FAN were actually served,

Petitioner also contends that, as a common carrier already

Petitioner alleges that it is not liable for any supposed

Finally, petitioner posits that the Preliminary Collection Letter,

On the other hand, respondents counter-argue that there was

Respondents further aver that petitioner failed to interpose a

THE RULING OF THE COURT

Warrant of Distraint and/or Levy

Before any revenue officer can conduct an examination or

records of a taxpayer for the purpose of collecting the correct amount

"SEC. 13. Authority of a Revenue Officer. - Subject to the

On the other hand, Section 228 of the NIRC of 1997, as

"SEC. 228. Protesting of Assessment. - When the

(b) When a discrepancy has been determined between the

(c) When a taxpayer who opted to claim a refund or tax

(e) When the article locally purchased or imported by an